RSI HOLDINGS, INC.
                         8.0% Convertible Note due 2005

October 10, 2000                                                     $250,000.00

     RSI HOLDINGS,  INC., a corporation organized and existing under the laws of
North  Carolina  (herein  called  the  "Company"),  for value  received,  hereby
promises to pay to MINOR H. MICKEL or her  successors  or assigns  (hereinafter,
the "Holder") the  principal  sum of Two Hundred  Fifty  Thousand  ($250,000) on
October 10, 2005 and to pay interest  thereon from the date of issuance  written
above annually on October 10 in each year,  (each an Interest  Payment Date), at
the rate of 8.0% per annum, until the principal hereof is paid or made available
for payment.  The interest so payable, and punctually paid or duly provided for,
on any Interest Payment Date will be paid to the Holder holding this Note on the
Interest Payment Date. Any such interest not so punctually paid or duly provided
for will be paid to such Holder on the next following  Interest  Payment Date or
be  paid at any  time  in any  other  lawful  manner.  All  unpaid  interest  is
convertible,  at the option of the Company or the Holder,  on the terms provided
herein.

     Payment of the  principal  of and interest on this Note will be made at the
office or agency of the  Company in  Greenville,  South  Carolina  or such other
office as the  Company  may in the  future  designate  (the  "Company  Office"),
provided  written  notice of such  designation is provided to the Holder of this
Note at the time of such  designation.  Payment of the principal of and interest
on this Note  will be made in such  coin or  currency  of the  United  States of
America  as at the time of payment  is legal  tender  for  payment of public and
private debts; provided,  however, that, at the option of the Company payment of
principal  and interest may be made by check mailed to the address of the person
entitled  thereto as such address  shall appear in the security  register of the
Company.

     The  Company  may  voluntarily  prepay any or all of the  principal  amount
     hereof  without  premium or penalty.  Once  borrowed and repaid,  principal
     cannot be re-borrowed.

     No  provision  of this  Note  shall  require  the  payment  or  permit  the
collection of interest in excess of that permitted by applicable law.

     TRANSFER.  The  transfer  of this  Note  is  registrable  in the  Company's
security  register (the  "Security  Register"),  upon surrender of this Note for
registration of transfer at the Company Office, duly endorsed by, or accompanied
by a written  instrument  of transfer in form  satisfactory  to the Company duly
executed by the Holder  hereof or her attorney duly  authorized in writing,  and
thereupon one or more new Notes,  of authorized  denominations  and for the same
aggregate  principal  amount,  will be issued to the  designated  transferee  or
transferees.  No  service  charge  shall be made for any  such  registration  of
transfer or exchange, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.

     THE SALE OF THIS NOTE HAS NOT BEEN  REGISTERED  UNDER THE SECURITIES ACT OR
     ANY STATE SECURITIES LAW IN RELIANCE UPON EXEMPTIONS THEREFROM.  THE HOLDER
     MUST HOLD THIS NOTE UNTIL  MATURITY OR CONVERSION  UNLESS THE SALE OR OTHER
     TRANSFER  THEREOF IS SUBSEQUENTLY  REGISTERED  UNDER THE SECURITIES ACT AND
     ANY APPLICABLE STATE SECURITIES LAWS OR EXEMPTIONS FROM SUCH  REGISTRATIONS
     ARE AVAILABLE.

     CONVERSION.  At any time prior to the maturity date of the Note, the Holder
may opt to convert part or all of this Note into  fully-paid and  non-assessable
shares of the common stock of the Company  (the "Common  Stock") at a conversion
price of $0.075 (Seven and One-Half Cents) per share of Common Stock, subject to


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adjustment as described  herein (the "Conversion  Price").  At the option of the
Holder (upon notice),  unpaid interest shall be added to the principal amount of
this Note and shall be equally  subject  to the  conversion  provisions  of this
Note.

     The number of shares of Common  Stock  into which this Note is  convertible
shall be adjusted from time to time as follows:

     (1) If the Company  shall,  at any time or from time to time (A) declare or
pay any  dividend  on its Common  Stock  payable  in its Common  Stock (a "Stock
Dividend"),  (B) effect a subdivision  of the  outstanding  shares of its Common
Stock into a greater number of shares of Common Stock,  by  reclassification  or
otherwise than by payment of a dividend in its Common Stock (a "Stock Split") or
(C) combine or  consolidate  the  outstanding  shares of its Common Stock into a
lesser number of shares of Common  Stock,  by  reclassification  or otherwise (a
"Reverse  Stock  Split");  then the number of shares of Common  Stock into which
this Note is  convertible  shall be adjusted so that the Holder  shall  receive,
upon  conversion,  the same number of shares of Common  Stock such Holder  would
have received had the Holder converted  immediately prior to the Stock Dividend,
Stock Split or Reverse  Stock Split and then  received the benefits of the Stock
Dividend,  Stock Split or Reverse Stock Split.  An  adjustment  made pursuant to
this paragraph (1) shall become effective (A) in the case of any Stock Dividend,
immediately after the close of business on the record date for the determination
of holders of Common Stock entitled to receive such Stock  Dividend,  (B) in the
case of any such Stock  Split,  at the close of business on the day  immediately
prior to the day upon which such corporate  action  becomes  effective or (C) in
the  case of any  Reverse  Stock  Split,  at the  close of  business  on the day
immediately prior to the day upon which such corporate action becomes effective.

     (2) If the Company shall, at any time or from time to time, declare, order,
pay or make a dividend or other  distribution  on its Common Stock,  (including,
without  limitation,  any  distribution  of other or  additional  securities  or
property or rights or warrants to subscribe  for, at less than fair market value
as determined in good faith by the Board of Directors,  other  securities of the
Company or any subsidiary of the Company now existing or  hereinafter  formed by
way of  dividend  or  spin-off,  reclassification,  recapitalization  or similar
corporate  rearrangement) other than a dividend payable in cash or shares of the
Company's  Common  Stock or rights or  warrants to  subscribe  for shares of the
Company's  Common  Stock,  then,  and in each such case (unless the Holder shall
receive any such dividend or other distribution on the same basis as though this
Note had been  converted  into shares of Common Stock  immediately  prior to the
close of business on the record date for the  determination of holders of Common
Stock  entitled to receive such dividend or other  distribution),  the number of
shares of Common Stock into which this Note is convertible  shall be adjusted so
that the Holder of this Note shall be entitled to receive,  upon the  conversion
thereof,  the number of shares of Common Stock determined by multiplying (A) the
number  of  shares  of  Common  Stock  into  which  this  Note  was  convertible
immediately  prior to the close of  business  on the  record  date fixed for the
determination  of holders of Common Stock  entitled to receive such  dividend or
distribution by (B) a fraction,  the numerator of which shall be the Fair Market
Value per share of Common  Stock on the record date fixed for the  determination
of holders of Common Stock  entitled to receive such  dividend or  distribution,
and the denominator of which shall be such Fair Market Value per share of Common
Stock less the fair value of such  dividend or  distribution  (as  determined in
good faith by the Board of Directors  of the Company)  payable in respect of one
share of Common Stock.  An adjustment  made pursuant to this paragraph (3) shall


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be made upon the opening of business on the next business day following the date
on which  any such  dividend  or  distribution  is made and  shall be  effective
retroactively  immediately  after the close of business on the record date fixed
for the  determination  of  holders of Common  Stock  entitled  to receive  such
dividend or distribution.

     For  purposes  hereof,  Fair Market Value shall be the fair market value of
the  Company's  common  stock,  as  determined  in good  faith  by the  Board of
Directors of the Company

     The Holder may exercise  these  conversion  rights as to a Note or any part
thereof by  delivering  to the  Company  during  regular  business  hours at the
Company Office the Note to be converted  along with written notice of the amount
to be converted  stating that the Holder  elects to convert such Note or portion
thereof.  Conversion shall be deemed to have been effected on the date when such
delivery is received  by the  Company at the  Company  Office,  and such date is
referred  to  herein  as the  "Conversion  Date."  As  promptly  as  practicable
thereafter, the Company shall issue and deliver to such Holder, a certificate or
certificates  for the number of full shares of Common Stock to which such Holder
is entitled, a check for cash with respect to any fractional interest in a share
of Common Stock, and, in the event of a partial conversion,  a replacement Note,
which shall be identical to the original Note except that the replacement  shall
be in a different  principal  amount and shall  indicate the date of issuance of
the original  Note,  the date of issuance of the  replacement  Note and that the
replacement  was  issued  as a  replacement  for the  original  as a result of a
partial  conversion.  The Holder shall be deemed to have become a shareholder of
record on the  applicable  Conversion  Date  unless  the  transfer  books of the
Company  are closed on the date,  in which  event the Holder  shall be deemed to
have become a Common Stock  shareholder of record on the next succeeding date on
which the transfer  books are open,  but the  Conversion  Price shall be that in
effect on the Conversion Date.

     No  fractional  shares  of  Common  Stock or scrip  shall  be  issued  upon
conversion of the Note.  Instead of any fractional  shares of Common Stock which
would otherwise be issuable upon conversion of the Note, the Company shall pay a
cash  adjustment in respect of such  fractional  interest  equal to the value of
such fractional interest as based on the Conversion Price.

     The  Company  shall at all times  reserve  and keep  available,  out of its
authorized  but unissued  Common Stock,  solely for the purpose of effecting the
conversion  of the Note,  the full number of shares of Common Stock  deliverable
upon the conversion of all Note from time to time outstanding.

     All shares of Common Stock which may be issued upon  conversion of the Note
will,  upon  issuance  by  the  Company,  be  validly  issued,  fully  paid  and
nonassessable.

     Upon  conversion  of the Note,  the Holder  thereof  shall be  entitled  to
receive any unpaid interest accrued (but not added to the principal of the Note)
through the Conversion Date.

     CERTAIN  NOTICES.  In case at any time the  Company  shall  propose  to (1)
declare any cash dividend  upon its Common Stock,  (2) declare any dividend upon
its  Common  Stock  payable  in  stock  or make any  special  dividend  or other
distribution to the holders of its Common Stock,  (3) offer for  subscription to
the  holders of any of its Common  Stock any  additional  shares of stock in any
class or other rights,  (4)  reorganize,  or reclassify the capital stock of the
Company  or  consolidate,  merge  or  otherwise  combine  with,  or sell  all or
substantially  all of its assets to,  another  corporation,  (5)  voluntarily or
involuntarily  dissolve,  liquidate or wind up of the affairs of the Company, or
(6) redeem or purchase any shares of its capital stock or securities convertible
into its capital stock,  then the Company shall give to the Holder of this Note,
by certified or  registered  mail,  (i) at least twenty (20) days' prior written


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notice  of the date on which the books of the  Company  shall  close or a record
shall be taken for such dividend,  distribution  or  subscription  rights or for
determining   rights   to  vote  in   respect   of  any   such   reorganization,
reclassification,  consolidation,  merger,  sale,  dissolution,  liquidation  or
winding  up,  and  (ii) in the  case of such  reorganization,  reclassification,
consolidation,  merger, sale,  dissolution,  liquidation or winding up, at least
twenty  (20)  days'  prior  written  notice of the date when the same shall take
place. Any notice required by clause (i) shall also specify,  in the case of any
such  dividend,  distribution  or  subscription  rights,  the date on which  the
holders of Common Stock shall be entitled  thereto,  and any notice  required by
clause (ii) shall specify the date on which the holders of Common Stock shall be
entitled  to  exchange  their  Common  Stock for  securities  or other  property
deliverable upon such reorganization,  reclassification,  consolidation, merger,
sale, dissolution, liquidation or winding up, as the case may be.

     GOVERNING  LAW.  This Note shall be governed by and construed in accordance
with the laws of the State of South Carolina  without regard to any conflicts of
laws principals or provisions.

     IN WITNESS  WHEREOF,  the  Company has caused  this  instrument  to be duly
executed as of the date first above written. RSI HOLDINGS, INC.

                                   By:      /s/ Buck A. Mickel
                                            --------------------------------
                                   Name:    Buck A. Mickel
                                   Title:   President and CEO

<PAGE>

                      OPTION OF HOLDER TO ELECT CONVERSION

     If you want to elect to have  this  Note  converted  in its  entirety  into
Common Stock of the Company as provided above, check the box: ______

     If you want to elect to have only a part of this Note converted into Common
Stock of the Company as provided above, state the amount you wish to convert:
$______________


Dated:                            Your Signature:
                                  (Sign exactly as name appears on the other
                                   side of this Security)


STATE OF                                             )
                                                     )
COUNTY OF                                            )

     BEFORE   ME,   the   undersigned,   on   this   day   personally   appeared
____________________________,  known to me to be the person,  acknowledged to me
that he executed this Option of Holder to Elect Conversion.

     GIVEN   UNDER  MY  HAND  AND  SEAL  OF   OFFICE,   this   _______   day  of
_________________, ________.


                                         Notary Public in and for

My Commission Expires: